Are You Now Able To Offset Your Farm Management Deposits?
- The Farmers Accountant
- Oct 12, 2021
- 4 min read
Farm Management Deposits Loan Offsets
It seems that increasing numbers of banks are establishing Farm Management Deposit Offset accounts to accommodate the agricultural sector. What this means is that you are now potentially able to able to offset the Farm Management Deposits that you might have against your farming debt to reduce overall interest.
There is now approximately $6 billion in FMD’s set aside by primary producers for emergency drought costs and other major farm expenses, and this represents a massive national pool of funds which could help dilute rural debt costs.
Although term deposit rates are modest, farmers are being urged to use their FMD’s to help trim back the cost of their debt load. The banks have bowed to public pressure on this and promised producers discounted interest deals on borrowings with farmers who have FMD facilities in place. Since the introduction of the FMD Loan Offset Scheme, Rural Bank was the only bank willing to offer this facility but the big banks are now coming on board with this facility – albeit very belatedly (since the scheme was approved by the federal government back in mid-2016).
The intention of the offset scheme was that it should be similar to offset contracts that home buyers enjoy when linking their savings and mortgage account. What is being offered by the banks is an interest rate concession on the loan offset. This interest rate concession is normally the customer margin so you will pay interest on the debt amount but not the interest plus the customer interest. For example, your interest rate might be 3.2% at the bank and in that component you might have a customer margin of 1.2% with the other 2% being the bank margin. If you were to offset your FMD against the debt, you could be saving the 1.2% of the interest not the full 3.2%. But this is still better than the current interest rate you would get on a term deposit by some margin so it is still worth the look.
The FMD Offset Schemes does however come with some rules around its eligibility and this is mainly to do with the trading entity of your business. Generally business loans that can be offset must be either in a sole trader name or partnership name to get access to the offset. Trusts and company debt can’t be used to offset FMDs as the individual does not own the debt directly.
Currently the Farm Management deposit rules are as follows:
They are capped at $800k per person. The deposit must be a minimum of $1,000. Deposits can be spread over multiple authorised deposit-taking institutions
The deposit must be held for at least 12 months to be deductible (there are exceptional circumstances which may allow you take withdraw early)
The deposit must be made by an individual (including a partner in the partnership or beneficiary of a trust)
Be carrying on a primary production business in Australia when the deposit is made
Have no more than $100k in taxable non primary production income in the year making the deposit.
NSW Mouse Control Rebate
Small businesses and primary producers may apply for rebates of up to $1,000 for purchases they have made for mouse control (mouse baits, traps, repellents or cleaning materials). The expense must have occurred from 1 February 2021. Applications will close on 17 December 2021 or when funds near their allocation.
To be eligible to claim the rebate you must be aged 18 or over and have a business or farm address within an eligible local government area (LGA) in the regions listed below:
Central Tablelands
Central West
Hunter (Upper Singleton & Muswellbrook LGAs only)
Murray
North West
Northern Tablelands
Riverina
South East (Hilltops, Upper Lachlan & Yass Valley LGAs only)
Western
Below is a link to the Services NSW website where you can make your claim and read more information. You will need to have a MyServiceNSW Account or be willing to set one up to claim the rebate.
The rebate is also open to households with the rebate limited to $500
ATO's STP Phase 2
The expansion of Single Touch Payroll (known as STP Phase 2) is scheduled to commence on 1 January 2022 and will require employers to report additional payroll information in their STP reports. For example, separate amounts will be required to be reported for paid leave, allowances, overtime, directors’ fees and salary sacrifice amounts. Also, employment and taxation conditions and income types will also be required to be reported (for example, salary and wages, working holiday maker income, or foreign employment income).
It is also important that you register with the ATO prior to employing a working holiday maker or foreign resident with the ATO since this cannot be backdated.
STP Phase 2 will also involve sharing information with Services Australia. Regarding the transition to STP Phase 2, the ATO has advised it is adopting a flexible approach. So long as the software that is being used for STP is ready for STP Phase 2 the additional information should begin to be reported at that time. There is an automatic extension to 1 March 2022 if there are difficulties with complying with 1 January 2022 deadline.
More information can be found by clicking below...
Fuel Tax Credit Rates
From 2 August 2021, the Fuel Tax Credit rate for general business uses (not used in heavy vehicles for travelling on public roads) is 43.3c/Litre and 16.9c/Litre for use in heavy vehicles travelling on public roads.
Bear in mind that if it is not used in heavy vehicles and is travelling on a public road, there is no claim under the Fuel Tax Credit Scheme.
Additional information can be found here: https://www.ato.gov.au/Business/Fuel-schemes/Fuel-tax-credits---business/Rates---business/From-1-July-2021/
BAS and Superannuation Lodgements and Payments
Generally, the BAS is due to be lodged and paid by 28 days following the end of the quarter if lodging on a quarterly basis. However if you lodge through a Tax Agent, the date is extended to 25 November 2021 (for the September quarter). A similar extension applies for every quarter for BAS’s lodged by a Tax Agent except for February – which has an across the board lodgement date of 28 February 2022. For monthly BAS lodgers, the lodgement date is 21 days after the end of the month (or one month later if lodging through a Tax Agent).
This extension does not extend to the Superannuation Guarantee lodgement requirements – which is to be lodged and paid by 28th October 2021 for the September quarter. Please make sure that SGL is calculated at 10% for all wages for 21/22 year.
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